Understanding Post-Covid Inflation Dynamics
Martín Harding, Jesper Lindé, Mathias Trabandt
Journal of Monetary Economics,
forthcoming
Abstract
We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. The nonlinear Phillips curve in our model arises due to a quasi-kinked demand schedule for goods produced by firms. Our model can jointly account for the modest decline in inflation during the Great Recession and the surge in inflation during the post-COVID period. Because our model implies a stronger transmission of shocks when inflation is high, it generates conditional heteroskedasticity in inflation and inflation risk. Hence, our model can generate more sizeable inflation surges due to cost-push and demand shocks than a standard linearized model. Finally, our model implies that the central bank faces a more severe trade-off between inflation and output stabilization when inflation is elevated.
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Supranational Rules, National Discretion: Increasing versus Inflating Regulatory Bank Capital?
Reint E. Gropp, Thomas Mosk, Steven Ongena, Ines Simac, Carlo Wix
Journal of Financial and Quantitative Analysis,
forthcoming
Abstract
We study how banks use “regulatory adjustments” to inflate their regulatory capital ratios and whether this depends on forbearance on the part of national authorities. Using the 2011 EBA capital exercise as a quasi-natural experiment, we find that banks substantially inflated their levels of regulatory capital via a reduction in regulatory adjustments — without a commensurate increase in book equity and without a reduction in bank risk. We document substantial heterogeneity in regulatory capital inflation across countries, suggesting that national authorities forbear their domestic banks to meet supranational requirements, with a focus on short-term economic considerations.
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Conditional Macroeconomic Survey Forecasts: Revisions and Errors
Alexander Glas, Katja Heinisch
Journal of International Money and Finance,
November
2023
Abstract
Using data from the European Central Bank's Survey of Professional Forecasters and ECB/Eurosystem staff projections, we analyze the role of ex-ante conditioning variables for macroeconomic forecasts. In particular, we test to which extent the updating and ex-post performance of predictions for inflation, real GDP growth and unemployment are related to beliefs about future oil prices, exchange rates, interest rates and wage growth. While oil price and exchange rate predictions are updated more frequently than macroeconomic forecasts, the opposite is true for interest rate and wage growth expectations. Beliefs about future inflation are closely associated with oil price expectations, whereas expected interest rates are related to predictions of output growth and unemployment. Exchange rate predictions also matter for macroeconomic forecasts, albeit less so than the other variables. With regard to forecast errors, wage growth and GDP growth closely comove, but only during the period when interest rates are at the effective zero lower bound.
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28.09.2023 • 24/2023
Joint Economic Forecast 2/2023: Purchasing power returns ‒ political uncertainty high
According to the Joint Economic Forecast, Germany's gross domestic product declines by 0.6% in 2023. This is a strong downward revision of 0.9 percentage points from the forecast made in spring 2023. "The most important reason for this revision is that industry and private consumption are recovering more slowly than we expected in spring," says Oliver Holtemöller, Vice President and Head of the Macroeconomics Department at the Halle Institute for Economic Research (IWH).
Oliver Holtemöller
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07.09.2023 • 23/2023
The German economy continues its downturn
High inflation, increased interest rates, weak foreign demand and uncertainty among private households and firms are currently weighing on the German economy. In its autumn forecast, the Halle Institute for Economic Research (IWH) expects gross domestic product (GDP) to decline by 0.5% in 2023 and to increase by 0.9% in 2024.
Oliver Holtemöller
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Konjunktur aktuell: Deutschland weiter im Abschwung
Konjunktur aktuell,
No. 3,
2023
Abstract
Die Weltwirtschaft verliert im Herbst 2023 weiter an Schwung. Die Produktion im Verarbeitenden Gewerbe und der globale Warenhandel stagnieren, gestiegene Leitzinsen verschlechtern das Investitionsklima. Die restriktive Wirtschaftspolitik drückt vor allem die europäische Konjunktur, welche zusätzlich von der Unsicherheit durch den russischen Angriffskrieg belastet wird. In Deutschland belasten die hohe Inflation, gestiegene Zinsen, eine schwache Auslandsnachfrage und Verunsicherung unter privaten Haushalten und Unternehmen die Wirtschaft. Die konjunkturellen Risiken sind für die Bauwirtschaft besonders hoch. Alles in allem dürfte das Bruttoinlandsprodukt 2023 um 0,5% zurückgehen, für das kommende Jahr wird ein Zuwachs von 0,9% prognostiziert.
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IWH-Flash-Indikator III. und IV. Quartal 2023
Katja Heinisch, Oliver Holtemöller, Axel Lindner, Birgit Schultz
IWH Flash Indicator,
No. 3,
2023
Abstract
Im zweiten Quartal 2023 stagnierte die Wirtschaftsleistung in Deutschland. Die Konsumausgaben der privaten Haushalte konnten sich nach den deutlichen Rückgängen in den beiden Vorquartalen stabilisieren. Dazu dürfte wohl auch die sich in den vergangenen Monaten abschwächende Inflation beigetragen haben. Die Sorgen der Unternehmen stiegen hingegen weiter deutlich: So setzt das Gemisch aus hohen Energiepreisen, geopolitischen und regulatorischen Risiken, gestiegenen Zinsen und Fachkräftemangel vor allem das Verarbeitende Gewerbe kräftig unter Druck. Die damit verbundenen Anpassungen lassen eine konjunkturelle Besserung erst Ende des Jahres 2023 möglich erscheinen. Das Bruttoinlandsprodukt (BIP) dürfte daher laut IWH-Flash-Indikator im dritten Quartal 2023 um 0,3% sinken. Im vierten Quartal beträgt der Zuwachs dann gemäß Indikator 0,5% (vgl. Abbildung 1).
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11.07.2023 • 19/2023
Stresstest für Sachsen-Anhalts Mittelstand
Die mittelständische Wirtschaft in Sachsen-Anhalt spürt die Folgen von Inflation, Konjunkturabschwung und Kostendruck. Die Stimmungslage der Unternehmen war im ersten Halbjahr 2023 deutlich schlechter als vor einem Jahr. Das geht aus der gemeinsamen Umfrage von Creditreform und Leibniz-Institut für Wirtschaftsforschung Halle (IWH) hervor, an der sich rund 460 Unternehmen aus Sachsen-Anhalt beteiligten.
Axel Lindner
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AIECE General Report, Part 2, Spring 2023
Andrej Drygalla, Axel Lindner, Birgit Schultz
IWH Studies,
No. 4,
2023
Abstract
The Halle Institute for Economic Research (IWH) is a member of AIECE (Association d'Instituts Europeens de Conjoncture Economique/Association of European Conjuncture Institutes), an association of independent European institutes involved in surveying economic conditions and developments, and in short-term macroeconomic forecasting. The main objective of the Association is to stimulate the exchanges between its members with a view to improve their insight into international economic developments. This ranges from the exchange of statistical or institutional information to discussions on economic policy Guidelines to common research activities. The AIECE organises between its members an exchange of view, of information and of literature on international economic developments, in particular in Europe. The Association provides the framework for joint activities of its members in areas of common interest. Its structure allows its members to develop common views on the future cyclical development. In order to meet these objectives the Association has half-yearly plenary meetings, centred around a general report on the European conjuncture prepared in turn by one of the members in cooperation with the other member institutes, but also with discussions of the working group reports and of special surveys prepared by member institutes. In Spring 2023, the report was written by the Halle Institute for Economic Research (IWH).
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AIECE General Report, Part 1, Spring 2023
Andrej Drygalla, Axel Lindner, Birgit Schultz
IWH Studies,
No. 3,
2023
Abstract
The Halle Institute for Economic Research (IWH) is a member of AIECE (Association d'Instituts Europeens de Conjoncture Economique/Association of European Conjuncture Institutes), an association of independent European institutes involved in surveying economic conditions and developments, and in short-term macroeconomic forecasting. The main objective of the Association is to stimulate the exchanges between its members with a view to improve their insight into international economic developments. This ranges from the exchange of statistical or institutional information to discussions on economic policy Guidelines to common research activities. The AIECE organises between its members an exchange of view, of information and of literature on international economic developments, in particular in Europe. The Association provides the framework for joint activities of its members in areas of common interest. Its structure allows its members to develop common views on the future cyclical development. In order to meet these objectives the Association has half-yearly plenary meetings, centred around a general report on the European conjuncture prepared in turn by one of the members in cooperation with the other member institutes, but also with discussions of the working group reports and of special surveys prepared by member institutes. In Spring 2023, the report was written by the Halle Institute for Economic Research (IWH).
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